Optimism over AMD’s new ‘Zen’ chip architecture is credited with boosting the company’s stock price.

Sitting behind a locked enclosure at Fry’s Electronics in North Austin is a box that contains a brand-new computer processor called Ryzen.

These processors, about the size of a poker chip, sell for between $330 and $500 and they are being marketed toward people with sophisticated computing needs, like video gamers and video editors.

Much of the design work on these chips was done nearly 19 miles away at Advanced Micro Devices’ 58-acre Austin campus. Ryzen is the first version of AMD’s new microprocessor design to hit the shelves this year.

AMD’s corporate headquarters is in California, but most of the company’s senior management team is based in Austin, where it employs 1,500 people.

Advanced Micro Devices has been in a slump for about a decade, analysts say, driven by an overall decline in the PC business and technology stumbles that let rivals, such as Intel, cement their dominance in the market. Its revenues have plunged 34 percent since 2010.

The last time AMD had a profitable year was 2011. By the summer of 2015, its share price had slid to under $2, sparking rumors that Advanced Micro Devices might be acquired by a competitor.

But now, with the release of its Zen-based chip designs, which offer improved performance that puts them on par with Intel, AMD is poised for a return to profitability.

“I’m a bit surprised because I really did almost think they were left for dead,” said industry analyst Roger Kay with Endpoint Technologies Associates. But now, Kay said, “the long drought is over.”

“We knew we had a competitive gap,” said Clark, a senior fellow at AMD. “We knew from just trying to improve on what we had was not going to be enough. We had to catch up, and do a ground-up design.”

It was a risky move for AMD, said Plummer, who is a senior director of engineering and managed the Zen team. The less expensive, faster option would have been to make more modest improvements on AMD’s existing chip architecture.

“It’s such a big investment,” Plummer said. “You have to be willing as a company to take that time and put all these people on it.” They knew going in that it would be a four-year design process.

The direction given to Clark, who was the lead architect on Zen, was to be bold and think big.

Don’t aim for modest improvements, Clark was told, but design a chip that made evolutionary leaps in performance.

“It was a really huge leap that was actually a little frightening for the team,” Plummer said. She noted that the team wasn’t even sure it could achieve the ambitious goals the company set, and felt the pressure of delivering enough technical improvements that the whole company would benefit.

Also, Clark said, when you’re designing a new chip architecture, the team is also trying to guess how technology will evolve in the next four years and predict where the competition is headed.

AMD wouldn’t say how many Austin-based engineers worked on the Zen architecture at AMD. Plummer said a majority of the team was based in Austin, and the leadership of the Zen team is here.

But when the American-Statesman sent a photographer out to take photos of members of the Zen team in March, dozens of employees emerged wearing “Ryzen” T-shirts.

Ralph Barrera/AMERICAN-STATESMAN STAFFAMD President and CEO Lisa Su announces unveils Ryzen at a launch event in East Austin on December 13, 2016.

Tough times at AMD

When it comes to computer processors — which make up a critical portion of AMD’s revenue — the company is the clear underdog, competing against chip powerhouse Intel, which has an 87 percent share of the market, according to Mercury Research.

In the past decade, AMD has struggled to keep up with Intel’s ability to churn out speedier computer processors.

Beyond its battles with Intel, some of AMD’s misfortunes are driven by the overall decline in the PC market. Last year, shipments of PCs dropped 5.7 percent, according to research firm International Data Corporation.

Starting in 2011, AMD conducted a substantial number of layoffs in order to cut costs, which analysts say largely affected people in administrative or marketing functions, while largely preserving the engineering talent. Its Austin workforce went from 3,000 in 2005 to 1,500.

“I wouldn’t necessarily call it survival,” said industry analyst Patrick Moorhead with Moor Insights and Strategy. “I would call it a way to hit the expectations of Wall Street while at the same time lowering (costs).”

Meanwhile, the company found ways to raise money and improve its balance sheet, such as selling additional stock, licensing agreements, and unloading its stake in two manufacturing facilities.

Under the direction of Lisa Su, who became CEO in 2014, AMD began a push to diversify beyond PCs.

Two years ago, 57 percent of AMD’s $5.5 billion annual revenue came from computing or graphics chips used in personal computers.

Last year, 46 percent of the chipmaker’s $4.3 billion annual revenue come from its PC division, with the rest coming from its server and customizable chip division, which include video game console sales.

Analysts say one thing that has kept AMD viable is its ability to customize chips for video game consoles, such as Microsoft’s XBox and Sony’s Playstation.

“They won all three of the major console makers,” said Kay, the analyst. “They did it because they could customize chips for them and they had a good architecture that worked for gamers.”

Mark Matson/FOR AMERICAN-STATESMANAMD’s corporate offices in Austin.

Keeping promises

When AMD first started talking about Zen in 2015, analysts were cautiously optimistic that this could be the design achievement that would make the company more competitive with Intel.

Early on, AMD promised a 40 percent improvement in computer processing speed, or “instructions per clock.” Over the next year-and-a-half, AMD would dribble out additional information about Zen’s performance capabilities at different speeches or marketing events in order to build interest.

When the chip was finally released, the company actually improved its processing speed by 52 percent, said Nathan Brookwood, an analyst with Insight 64. “That is super important as it puts Ryzen in the same performance category of the fastest Intel chips,” he said.

“Sometimes it comes down to how things were said, and how things were promised,” Moorhead said. “The fact that this is the closest that AMD has come in CPU performance to Intel in almost a decade — that’s a pretty big deal in my book.”

But the Zen optimists say there’s still plenty more upside at AMD, and if all goes well over the next year the company could be in a hiring mode again, which could mean more jobs at its Central Texas campus.

Meanwhile, Clark says the processor design team at Zen is already thinking about the next challenge.

“Zen is not a destination,” said Clark, who radiated confidence about the company’s prospects. “It’s the first step of a journey… we’re going to make riskier moves to get more reward and the industry is going to benefit from it.”

He noted his long history with AMD, a career that started 23 years ago with the company’s K5 desktop processor, which was released in the mid-1990s.

“I’ve learned a lot from our mistakes,” Clark said. “You learn way more from your mistakes and from your failures than your successes.”